It's tempting to sit back and relax once you have moved into your new home - but hang on, have you made sure that you are insured against all the risks that could stop you from meeting your home loans bank repayment schedule? Many things could go wrong and make it impossible for you to work so that you will have the income to meet your monthly bond repayments and living expenses. Furthermore, interest rates on home loans could go up to the extent that you will no longer be able to afford the repayments. If you are responsible for a family, then it is particularly important that you take heed of the following issues:
Rising interest rates
What happens if interest rates increase and you can no longer afford your monthly repayments? It is possible to fix the interest rate of your bond for a predetermined period of time so that you pay the same amount of interest each month regardless of Reserve Bank interest rate fluctuations. On the other hand, if the interest rate on home loans bank repayments goes down while your bond is on a fixed interest rate then you will continue to pay that rate but you will benefit because you will be paying in more each month over and above the interest rate.
What if you are made redundant? You can claim from the Unemployment Insurance Fund for a certain time after you have lost your job but the amount you will receive will be a percentage of your former salary and is often not enough for a family to live on, let alone pay the bond. As a result, you might not be able to keep up with your home loans bank repayment schedule and risk having your house repossessed by the bank. It is therefore possible to insure your salary against the possibility of being laid off in the future by taking out salary protection insurance through an insurance company.
Illness and disability
The insurance industry estimates that 1/5 of men and 1/6 of women have to permanently leave work before retirement age because of a serious illness or accident. Think about it, if you have a heart attack at the age of 45 then you are unlikely to go back to work again. With a family to support and a home loans bank repayment schedule to meet, this could be disastrous. It is possible to take out disability cover for a relatively small monthly fee that will pay out a sum of money should you be unfit for employment. The earlier in life you take out this type of insurance cover the better, and you should start paying in while you are still young and healthy.
What if you die while you are still young and before retirement age, leaving your family to cope with an outstanding home loan? You can take out life cover which is relatively inexpensive and will pay out a lump sum upon death. Like disability insurance, life cover should be taken out early in life, allowing as many potential years of premium payments as possible.
As you can see from the above questions your ability to meet your home loans repayment schedule has a lot to do with your continued good health. Fortunately, there is an insurance plan to cover almost any eventuality and many of them are fairly cheap provided you shop around. In any case, the amount you pay for this protection is worth every cent for the peace of mind it will give you.
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